NISA news

There’s been much talk of greenshoots this week, especially from the European Central Bank (although Mervyn King has just sought to play down widespread talk of 'green shoots' and cautioned that the outlook for the UK economy remains uncertain). But here is some interesting, positive news. According to IMA stats the 2008/09 ISA season saw net inflows of £529.1 million, 74% more than the previous year’s inflow of £303.8 million (and yes that’s equity ISAs rather than cash ISAs). But as Meg said last year, should we be worried that given the lack of attractive saving alternatives more money is being ploughed into equities?

Jo Parker
CEO

The signs aren’t good

Redundancies for the three months to February 2009 were 270,000 - up 45,000 over the quarter and up 162,000 over the year. This is the highest figure since comparable records began in 1995.

Gross Domestic Product (GDP) contracted by 1.9 per cent in the first quarter of 2009. Hotels, restaurants, transport, storage and business services all fell in terms of output in the 3 months to February this year.

And yet I look at my share portfolio and it has risen – significantly - in recent weeks. April was the best month for the FTSE 100 in six years, and the media are reporting that we are now officially in a bull market having risen more than 20% from the recent lows in March.

All of which leads me to one question. Are we experiencing a ‘W’, a ‘U’, a ‘V’ or even an ‘L?’ Are we positively talking our way out of things or is the widely derided ‘global rescue package’ actually working? Should I capitalise on my short-term gains and hope the markets plummet over the summer, or should I wait and keep my fingers crossed that stocks keep slowly rising back up?

To be honest, it doesn’t really matter that much – this is just a bit of fun for me. But for the estimated 1 million Britons that are due to retire this year, the answer to this question has a profound impact on the rest of their lives. The new guidance and information opportunities suggested as part of the Thorenson Review will help. But perhaps our thinking should be more profound than this. Perhaps we should stop thinking about equities being the investment vehicle for mainstream retail products and look to alternatives?

Meg Steele
Client Services Director

Another retailer banking on finance in the future

Following on from our previous piece and the obvious move of Tesco to become a fully regulated bank after a decade of white labelling other companies products. We now hear that another High Street retailer is likely to follow suit.

Boots the high street peddler of cough syrup, toothbrushes and beauty products has announced it’s considering a regulatory status and selling personal banking products throughout it’s 2600 chemists and retail stores.

This begs the question just why do these business believe that they have the credibility, and what it takes to offer an overpriced current account and a second rate customer experience!

Well in fact they don’t, what they do have however, is an understanding of the imperatives that drive commodity purchases and a depth of knowledge about creating a great customer experience. That and of course they have the experience of using them in both the real and virtual world.

For many years Financial Service brands have used affinity deals with retailers and other brands in their pursuit of new customers, mainly because they found it difficult to travel across the emotional gap between their businesses and what their prospects valued and desired.

What they didn’t realise in undertaking this strategy is that in so doing they transferred all of their expertise, knowledge and credibility to their affinity partners, who while happy in the short term to share revenue streams, ultimately gained a longer term prize of being recognised as a capable financial provider.

This of course has all come at a time when consumer trust and belief in the financial institutions they grew up with has been shaken to the core, with the nationalisation and collapse of the Banking sector.

So while the retailers of today who are looking at the banks of tomorrow should have a lasting gratitude to organisations such as MBNA. Perhaps it’s time for the Banks of today to really sit up and take notice of what will become of retail in the future.

Ps. You might also find it slightly ironic that MBNA was set up in a Newark, Delaware supermarket, just goes to prove, what goes around, comes around.

David McCann
Planning Director

Martin Lewis more popular than Barrack Obama

Here's a sobering thought. Google trends shows that more people in the UK are searching out Martin Lewis than Obama with the exception of two brief moments in time!


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Watch out - here come the retailers!

As predicted at the beginning on 4 March (Who will eat the banks’ lunch) the retailers will fill the vacuum left by the big banks and building societies.

Did you see Tesco is launching 30 in-store banks by the end of the year under the brand name of Tesco Bank as part of the expansion of its financial services operation?

The supermarket, which has been trialing the concept in Glasgow since 2006, will use the banks to offer insurance, savings and credit card products from Tesco Personal Finance (TPF). Tesco is also planning to launch a current account within the next two years while mortgages are also being considered. Interesting times don’t you think?

Jo Parker
CEO

What price principles?

As recession hits, how much are people prepared to pay over the odds for their principles?

- Total organic sales fell by 11% in December 2008

- Tracker funds under management in the fourth quarter of 2008 were £19.8bn, down 5 per cent on £20.9bn in the third quarter of 2008, while Ethical funds under management in the fourth quarter of 2008 were £4.4bn, down 7 per cent on the previous quarter.

It will be interesting to watch consumer behaviour over the next 12 months and see if the saying ‘a principle is not a principle until it’s cost you something’ holds true.

Jim Poulter
Client Services Director

You don’t know me!

I was reading blog entries by Nigel Hollis, Chief Global Analyst for Millward Brown, one of the world’s leading research companies today.

Two entries struck me and started me thinking. One was about the all pervading (and intrusive?) Facebook. Mr Hollis was saying that most analysts believe Facebook will started monetizing data, using it to target advertising.

So my status notes I am looking forward to my trip to Nepal, and Facebook delivers me Travel Insurance ads. Handy for me, great for advertisers and even better for Facebook. A truly targeted piece of advertising. Brilliant – probably a little irritating after a while and even bordering on slightly creepy, but brilliant nonetheless.

Two weeks earlier Hollis discussed the importance of locally applicable retail, citing the FT article focusing on how the Shanghai launch of Marks and Spencer had not gone according to plan in spite of 20 years experience trading in nearby Hong Kong.

So, what can we gain from this? That some have grasped that what works in one region often fails in another…and that those who want to make a success need to start targeting (and therefore making more cost effective) their communications.

As the world supposedly becomes more global and uniform, it still seems to amaze some that highly targeted advertising, messaging and positioning is important.

Love may be the global language, but communication is by nature essentially local.

James Maxwell
Copywriter

Has Trust Gone Bust?

Opinion Leader Research are hosting a debate tomorrow night with this title and in advance I was mulling this over and the age old debate about trust (or lack of it) in financial services. You know how it goes. "How can we rebuild trust after the Equitable debacle, endowment shortfalls, dropping pension values, state run banks and large bonuses..?"

Well the answer is clear, we can't. Trust has gone bust, but not just in financial services. That's because in society we don't trust like we used to. We question governments, businesses, Drs - we check out what we are told on the internet and we make our own decisions. The only person we really, truly, trust these days is ourselves.

So, let's stop this debate once and for all. The question we really need to focus on is “How do we engage better with the Recommendation Generation?"

Jo Parker
CEO

So, what next?

In February last year I met with an IFA to discuss my financial situation. I had a lump sum I wanted to invest and wanted some professional advice. During the course of his visit he stated:

1) That he expected the FTSE to close the year at 7,200 pts.
2) That property was still showing significant signs of growth with no real evidence that it was about to drop.

Now luckily, through sheer inertia I didn't take up any of his advice and stuck the lot across two high interest savings accounts while I figured out what next?

What next was I sat down 13 months later - last night to be precise - to decide what to do with the money that's now languishing accruing 4 pts less interest than when I opened the accounts a year ago. My wife and I spent 2 hours discussing our next move - we decided agaist an IFA - we decided against taking advice from my brother-in-law (a wealth manager) - we decided against buying property, because who knows.

We ended up deciding to go to the Caribbean at Christmas, frankly there appear to be so few options out there at the moment you might as well spend it, it's devaluing anyway. Any better options will be considered and probably disregarded.

Crispin Heath
Head of Digital

How will we fund our retirement now?

The EU has announced today that compulsory retirement at 65 is NOT unlawful. This could turn into a UK law that is both short sighted and out of touch. Given that people’s pensions are insufficient (or even non-existent), the cost of living keeps on rising, and we’re living longer, why should those that are healthy and happy to work beyond the age of 65 not be able to do so? The Government’s continued and sensible policy of self-funding our retirement is fine. But it’s far too late for people in their 60s to make a significant difference to the return on their investments and secure themselves a prosperous retirement.

Either people are given the guarantee of a financially secure retirement (not going to happen any time soon), or they are allowed to continue to earn a wage if they choose to do so. Please don’t completely lose sight of the short term picture, and please help people to help themselves.

Montse Tojeiro

Who will eat the banks’ lunch?

Interesting to read this week that Tesco Personal Finance reported a near doubling of the amount of money deposited with them during the past six months. Tesco Personal Finance said more accounts were opened with them during December alone than in the whole of 2007, boosting their saver numbers up to around 500,000.They credited the strong flow of funds during the month to a particular savings account which was offered for a limited time and attracted "tens of thousands of savers". Tesco already offers savings products, loans and insurance and have plans to offer a full banking service, including current accounts and mortgages. Surveys had previously shown that consumers trusted supermarkets more than they trusted banks, even before the current financial crisis. 500,000 accounts may seem small fry, but with the chance to offer a retail experience very different to the banks and a brand synonymous with value for money, watch this space!

Jo Parker

In the shoes of income seekers

Having just spent a weekend looking at income options with my retired Mum who hasn’t a pension to fall back on – I have realised that the search for income when you are in your 70s is very stressful indeed. Firstly if, like my Mum, you don’t have a pc you have to go round to different banks and building societies by foot – and then be ‘sold to’ at each visit. You are probably not being given the best or latest deals either – so you really are e-excluded.

You are often given contradictory information – one person told her that annuity rates were the best they have been for ages – yet in the papers there has been wide coverage about how annuity rates are low.

She was told that although interest rates were the lowest they had been well since records began, that she should guard savings against inflation coming back in 3 years.

She doesn’t understand that some advisers are qualified to tell her about some products and not all (such as Lifetime Mortgages).

She was also told about a capital guaranteed product linked to the FTSE 100 available from a building society – but then told that if the asset manager who was offering it went under, she would loose any money over the £50,000 compensation amount. So it feels like no guarantee at all from where she is sitting.

And when you are in your mid 70s you want security. You don’t want to have to review your money every 6 months and trek around finding the best deal (she thinks she can’t afford an IFA by the way). In fact she feels that when things should be getting simpler and easier, her financial situation and the options available to her have never been more complex. And she is right. It is a minefield and I can tell you I am not looking forward to having to do this when I am retired - and I know a thing or two about this stuff!